Watch Out Harry Fox, Loudr Is Coming For You
NewsDigital Music News

Up until now there have really only been three ways for
independent artists to easily release cover songs legally:
purchasing a mechanical license from Harry Fox Agency’s (HFA)
service Songfile, purchasing a mechanical license from
Limelight (which Google acquired in 2011) or distributing the
music with Loudr. Sure, the traditional way was to go to the
publisher directly with a notice of intent and then report (and
pay) the publisher directly, but this is not a viable
option for independent artists.

But, Limelight is shutting down its song clearance program next
week. So Loudr is swooping in to pick up the slack.

Loudr is undercutting their only competition, Harry Fox, by
offering a cheaper service. For $15 (less if bought in bulk),
any artist can obtain a compulsory mechanical license simply by
estimating the quantity they will sell and then calculating
that by the statutory royalty rate set by the government (9.1
cents per download/physical sale). If the artist ends up
selling MORE downloads than they initially estimated on Loudr,
the artist can go to their completed order and repurchase
license for a 50% discount (on the service fee).

Loudr and HFA (Songfile) pass on 100% of the royalties (paid by
the artist for obtaining the license) to the publishers.

Both Loudr and HFA’s Songfile service charge 1 cent per stream
which is MUCH higher than what every streaming service is
paying per stream for mechanical royalties.

Both companies overestimate so much to make the publishers
happy. But, I would advise artists NOT to pay for a license for
streams because most services already pay publishers directly
(more on this below) AND if a publishing company actually
wanted to audit an artist, they could only demand the amount
legally owed to them which is an extremely complicated equation
based on each streaming service’s revenue and subscriber count.

Here’s how US streaming mechanical royalties are calculated
(set by the US government):

You don’t need a mechanical license for streams on Spotify,
Rdio or Deezer!

And this is where it gets a bit tricky (and awfully confusing
for the Loudr/Songfile customer). Spotify pays mechanical
royalties directly to Harry Fox and then Harry Fox pays these
royalties out to the publishers. The royalties artists
see on their statements from their distributor (CD Baby,
DistroKid, TuneCore DO NOT include mechanical
royalties).So Spotify streams should not be
calculated when purchasing a license from Loudr (or Songfile)
for a cover song – even though most would think they would
be. Similarly, Rdio has a direct deal with Music
Reports Inc. (MRI) and Deezer’s mechanical royalties are paid
directly to collections agencies in the territories in which
they are available which then get distributed to the
appropriate publishing companies. Loudr lists SoundCloud and
Bandcamp streaming as examples of services which you’d need to
pay for streaming mechanical royalties, however they don’t
explicitly list which streaming services require a
mechanical license and which don’t. Technically, hosting a
streaming cover on your website requires a license.

Loudr’s CEO, Chris Crawford, mentioned to me over the phone
this morning that most US streaming services are moving in the
direction to pay publishers (or HFA/MRI) the mechanical
royalties directly anyways.

Also, currently SoundCloud doesn’t pay anything for streams
(except to WMG and soon to Sony and Universal). So an artist
would be LOSING quite a bit of money if they bought a
compulsory mechanical license to (legally) put their song on
SoundCloud. They might as well continue the route of uploading
their music (illegally) like most users have been doing since
SoundCloud (and YouTube’s) inception and let the services sort
it out with the labels and publishers later – like YouTube has
(kind of) and SoundCloud is starting to do.

But YouTube is another case altogether. All sorts of laws are
being broken here, but because YouTube has been able to
monetize these illegalities, the labels and publishers have
come around to getting paid for (illegal) cover songs and fan
videos.

Loudr explains they will not license remixes or samples. These
require permissions directly from the master owners (the
labels). But no indie artist ever obtains these. It’s nearly
impossible to do so as an indie artist. DubSet is looking
to fix this, though. More on them in another piece.

Loudr will also not issue licenses for translations (“Let It
Go” in Spanish) or derivative works (Weird Al) as this requires
permission directly from the publisher/songwriter.

Bandcamp is releasing their subscription service any day now and it is
unknown if they are going to pay out mechanicals directly to
Harry Fox (like Spotify) or Music Reports (like Rdio) or
require the rights owners to do that (like iTunes does in the
US).
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Regardless, every digital distribution service (and store –
like Bandcamp or CD Baby) puts the burden of obtaining the
mechanical license on the artist. Loudr is THE ONLY
indie digital distribution service (open to any
artist) to hunt down this license for the artist and handle all
of the paper work. For their distribution service, they don’t
require the artist to purchase the license up front, BUT they
do take the most commission of any digital distribution service
out there (30% for covers) for this hassle.

Loudr understands that 30% commission is a hard sell
(especially when all they’re doing is sending their artists’
songs to digital retailers, so they setup this stand alone
mechanical licensing service to allow artists to distribute
with another service of their choosing (like DistroKid, CD Baby
or Tunecore).

“The launch of Loudr Licensing puts us in a strong strategic
position to empower artists, compensate music publishers, and
continue scaling our technologies to support the mechanical
licensing needs of enterprises in the music space.” –Chris Crawford, CEO, Loudr

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